Select Medical (NYSE:SEM) Holdings Corporation (NYSE:SEM), a mid-cap stock, has seen notable volatility in its share price recently, peaking at $32.17 before dropping to a low of $25.87. As of Tuesday, the stock is trading at $26.13.
The company's price-to-earnings (P/E) ratio currently stands at 16.93x, slightly lower than the industry average of 21.54x. This suggests that Select Medical Holdings' shares are reasonably priced relative to its industry peers. However, if investors believe this should be the long-term trading level for the company, the upside potential might be limited compared to other players in the industry.
Despite this, Select Medical Holdings' high beta indicates a greater volatility in its share price compared to the market as a whole, which could present future investment opportunities. In a bear market scenario, the company's shares could drop more than the rest of the market, providing an attractive buying opportunity.
Investors must also consider the company's future prospects when contemplating stock purchases. Select Medical Holdings' earnings are forecasted to surge by 64% over the next few years, suggesting an extremely positive future trajectory. This expected earnings growth could improve cash flows and potentially drive up the company's share value.
While value investors might emphasize the importance of intrinsic value relative to price, an investment thesis that combines high growth potential and an affordable price could be more appealing to those seeking growth.
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